European Closing Report
President Trump also warned that US nuclear capabilities are massive and powerful but he prays they never have to be used. Both US and European equity markets skidded lower with the German DAX leading declines while safe haven assets including the Japanese Yen and gold shot higher.
Italian political uncertainty also remains in focus although government bond yields have steadied today despite reports that President Mattarella is opposed to PM candidate Conte’s choice for ministerial roles.
Elsewhere in fixed, US and core European yields have nudged lower after an earlier uptick on strong UK retail sales data. The data also provided a boost to the pound although this has faded somewhat this afternoon.
US data releases were on the soft side meanwhile as jobless claims ticked up and existing home sales missed forecasts. At the Fed, Atlanta President Bostic said the FOMC should get rates to the neutral level and let the economy work, adding that he sees the neutral rates at 2.25-2.75%.
We also heard from the BoE’s Ramsden who said he is comfortable with the view that the first quarterly slowdown was temporary and also sees domestic inflation pressures strengthening. He added that he sees rates rising gently over the next three years. Still to come today, a $30.0 Bln 7-year note auction plus possible comments from BoE Governor Carney and Philly Fed President Harker.
US Closing Report
Energy stocks have lagged the broader market, tracking declines in oil prices – US crude futures settled at $70.71 (-$1.13).
Stocks had tumbled earlier in the session after US President Trump pulled out of the upcoming North Korean summit citing recent hostility. He also warned that US nuclear capabilities are massive and powerful but he prays they never have to be used.
Perceived safe-haven assets also received a boost with the Japanese Yen and gold prices still firmly in the green. In the bond markets, US yields have nudged lower for the day with the 10-year down 2 basis points at 2.98% with little reaction shown to the $30.0 Bln 7-year note auction – the sale stopped through by 0.5 basis points to 2.930%.
We also head from Philadelphia Fed President Harker said he has not moved far from the baseline for three hikes in 2018. He added that they are getting close to the neutral rate and it is possible that 2019 marks the end of the tightening cycle.
Sterling meanwhile was largely unresponsive to comments from BoE Governor Carney who reiterated his view that weakness seen in the first quarter was temporary.
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